Dependent Care FSA benefit on W-2 (Box 10) that I never received - tax impact help!!!

Thank you so much for this explanation! So if I'm understanding correctly, even though I never used that $3,300, I still have to subtract it from my total daycare expenses before calculating my dependent care credit? My total daycare expenses for my two kids was about $15,000 for the year. So would I be able to claim the credit on $15,000 - $3,300 = $11,700? Also, is there any way I can argue to the IRS that since I never received this benefit, it shouldn't count against my eligible expenses?

Yes, you're understanding correctly. Even though you didn't use the $3,300, the IRS still considers that amount as "available" to you, so you need to subtract it from your total expenses before calculating your credit. With $15,000 in total expenses for your two kids, you would subtract the $3,300 and potentially claim the credit on the remaining $11,700 (which is still under the $16,000 maximum for two or more children). That's much better than losing the credit entirely! Unfortunately, there's no formal process to argue that the unused FSA shouldn't count against you. The IRS rules are pretty strict about this. The money was technically made available to you while you were employed, even if you didn't use it before leaving. The "use it or lose it" aspect of FSAs is one of their notable drawbacks.

Does taxr.ai actually work with FSA-specific issues? I've been dealing with a similar situation where my employer put funds in my dependent care FSA but I couldn't use them all before the deadline. How detailed does their guidance get for this type of situation?

I'm skeptical about tax document services. Do you actually speak with a tax professional or is it just some AI scanning your forms? I'm worried about privacy too - uploading my W-2 and tax docs to some random site seems risky.

Yes, they specifically helped me understand how the dependent care FSA interacts with the dependent care credit. They pointed out that Box 10 amounts don't increase your taxable income but do reduce eligible expenses for the tax credit. They even showed me exactly where to report everything on Form 2441. It's not just a person reviewing your documents - their system analyzes the forms and provides specific guidance for your situation, which was super helpful for understanding the FSA rules. The analysis was much more detailed than what my previous tax preparer told me. Regarding privacy, I was concerned too, but they use bank-level encryption and don't store your documents long-term. You can also delete your data after receiving your analysis. I felt it was secure enough given how much it helped me avoid mistakes on my return.

How does this actually work? I've been trying to reach the IRS about my W-2 issues for weeks. Do you have to provide personal info to this service? Not sure I'm comfortable with that.

Come on, this sounds like a scam. Why would I pay a service to call the IRS when I can just do it myself? The IRS eventually answers if you call at the right time. These "skip the line" services are probably just taking your money for nothing.

It works by continuously calling and navigating the IRS phone tree until it finds an available agent. When it reaches a live person, it connects you directly. You just provide your phone number so they can call you back when they reach an agent. The service doesn't need or ask for any tax information or personal details - they're just handling the calling part, not discussing your specific tax situation. That conversation happens directly between you and the IRS agent. I was also skeptical at first, but after spending three days trying to get through myself with no success, I was desperate. They got me connected to an agent in about 45 minutes during peak tax season, when I had previously waited on hold for over 2 hours before getting disconnected.

Thanks for this suggestion! I actually did reach out to HR back when I left, and they told me any unused funds would be forfeited immediately upon my last day. I didn't realize at the time how this would affect my taxes or I would have tried to use the funds before leaving. Do you know if there's any time limit on when you can challenge this with HR? I left in August 2023, so it's been about 7 months now.

Unfortunately, if HR already confirmed the funds were forfeited upon your departure, there's likely little recourse at this point. Most plans have strict deadlines for submitting claims, typically 90 days after termination at most. After 7 months, it's almost certainly too late to challenge this with HR. Their policies about forfeiture upon termination are generally spelled out in the plan documents, and they have to follow those rules consistently for all employees. At this point, your best approach is what others have suggested - claim the dependent care credit for your expenses above the $3,300 amount shown in Box 10. While it's frustrating to lose access to money that was allocated for you, you can still benefit from the tax credit on your additional expenses.

Great question! There's an annual limit that applies across all employers for Dependent Care FSAs. For 2023, that limit was $5,000 for single filers or married filing jointly ($2,500 if married filing separately). If you've already participated in a DCFSA at your previous employer this year, you need to count those contributions toward your annual limit at your new job. For example, if you contributed $2,000 at your old job, you can only contribute up to $3,000 at your new employer for the year. Make sure to inform your new employer's HR about your previous FSA contributions so they can adjust your maximum accordingly. If you accidentally exceed the annual limit, it can create tax complications.